Court Procedure Matters

On November 6, 2019, President Trump announced his intent to nominate Ms. Alina Ionescu Marshall and Mr. Christian N. Weiler to serve as Judges on the United States Tax Court (Tax Court). Mr. Travis Greaves was previously approved by the Senate Finance Committee to be a Tax Court Judge and is awaiting confirmation by the

It took five years, but the Internal Revenue Service (IRS) has finally released some guidance on the taxation of cryptocurrencies! On October 9, 2019, the IRS released Revenue Ruling 2019-24 and several “frequently asked questions” (and answers) which deal with some (but not all) of the federal income tax issues involved with cryptocurrencies.

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On August 5, 2019, the Senate confirmed Courtney Dunbar Jones and Emin Toro as nominees to the US Tax Court in a voice vote before leaving for August recess. Jones and Toro will now each serve a 15-year term. President Trump had initially nominated each candidate in 2018, but the Senate was not able to confirm their appointments prior to the end of the last 2018 session—requiring the candidates to be renominated in February of 2019. We reported the initial nominations in “President Trump Announces Intent to Nominate Emin Toro to Tax Court” and “President Trump to Nominate Greaves to Tax Court; Senate Confirms Copeland and Urda.” Furthermore, we reported the renomination of these nominees in “Renominations to Fill Vacancies on the United States Tax Court.”
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Laura L. Gavioli, PC, recently wrote an article for Law360 on a US Court of Appeals for the District of Columbia Circuit’s decision that may provide an equitable avenue for hearing of late-filed petitions in US Tax Court. The Law360 article, “Myers May Make It Easier to Find Equitable Relief in Tax Court,” can be

On June 20, 2019, the United States Court of Federal Claims published its long-awaited opinion in California Ridge Wind Energy, LLC v. United StatesNo. 14-250 C. The opinion addressed how taxpayers engaging in related party transactions may appropriately determine the cost basis with respect to a wind energy project under the Internal

Last week, the US Supreme Court ruled that North Carolina may not tax a trust’s income when the trust’s only contact with the state is the in-state residence of discretionary beneficiaries. The Due Process Clause requires a minimum connection between a state and the person it seeks to tax. The mere residency of the discretionary

The concept of limited scope representation is not a new one in the legal arena. Rule 1.2(c) of the ABA Model Rules of Professional Conduct provides that “A lawyer may limit the scope of the representation if the limitation is reasonable under the circumstances and the client gives informed consent.” This rule has been broadly embraced by states. The idea of limited representation in Tax Court cases has been floating around for years. It has mostly come up in the context of pro se taxpayers who appear at calendars calls. There may be one or more volunteers willing to assist the taxpayer but are unable to enter an appearance on the spot for various reasons (e.g., inability to conduct a conflicts search, uncertainty as to whether the taxpayer will be responsive in the future, inability to determine whether case has merit). In this situation, the volunteer is usually not allowed to speak on the taxpayer’s behalf to the Court to try to assist with resolving the case and handling procedural matters.

In 2018, Special Trial Judge Carluzzo and Special Trial Judge Panuthos invited suggestions for better assisting unrepresented and low-income taxpayers in the Tax Court. In response, the American Bar Association Section of Taxation recommended that the Tax Court consider amending its rules to permit counsel to enter an appearance for a limited time or purpose. At the time of the recommendation, approximately 69% of all Tax Court petitioners and 91% of petitioners in small tax cases were self-represented. The Section of Taxation pointed out that many self-represented petitioners before the Tax Court do not understand the law or court rules and therefore are unable to make an effective legal argument. This results in inefficiencies in the Tax Court, as well as inequality because the IRS is always represented by counsel.
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In Kearse v. Commissioner, T.C. Memo 2019-53, the Tax Court held the Internal Revenue Service (IRS) abused its discretion as part of the taxpayer’s Collection Due Process hearing (CDP hearing) because the Appeals officer failed to properly verify that the assessment of the taxpayer’s unpaid 2010 liability was preceded by a duly mailed notice of deficiency.

The taxpayer, well-known to sports fans, was Jevon Kearse. Mr. Kearse, nicknamed “The Freak” for his athletic ability, played for 11 seasons in the National Football League and tallied 74 career sacks as a dominating defensive end. Based on the description of events by the Tax Court, Mr. Kearse’s attorneys outmaneuvered the IRS similar to the way Mr. Kearse had offensive tackles tripping over their shoestrings.
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A recent case decided by the US Tax Court reminds us that when you litigate a case in Tax Court, what happened during the Internal Revenue Service (IRS) examination and Appeals bears very little relevance (if any) once you get to court. Generally, Tax Court’s proceedings are de novo, and the court looks solely to the IRS’s position in the Notice of Deficiency (Notice). The Revenue Agent’s Report and other statements made by the IRS before the issuance of the Notice are typically ignored.

In Moya v. Commissioner, 152 TC No. 11 (Apr. 17, 2019), the IRS determined deficiencies related to the disallowance of certain business expense deductions. The taxpayer did not assign error to the disallowance, but instead argued that the Notice was invalid because the IRS had violated her right to be informed and her right to be heard under an IRS news release and an IRS publication outlining various rights of taxpayers. Specifically, the taxpayer asserted that she had requested that her examination proceedings be transferred to California after she had moved from Las Vegas to Santa Cruz, and that the IRS had violated the her rights by providing vague and inconsistent responses to, and by ultimately denying, her request.
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Many states and localities give incentives for business to move or transact in their locations. There has always been a question of whether these incentives are taxable income under federal income tax law. Internal Revenue Code (IRC) section 118, as amended by the Tax Cuts and Jobs Act, P.L. 115-97, provides that “[i]n the case of a corporation, gross income does not include any contribution to the capital of the taxpayer….(b) For purposes of subsection (a), the term “contribution to the capital of the taxpayer” does not include—…(2) any contribution by any governmental entity or civic group (other than a contribution made by a shareholder as such).”

In a recent case, the US Tax Court ruled that certain cash grants given by the State of New Jersey fit squarely within IRC section 118, and were not taxable to the corporate taxpayer. Brokertec Holdings, Inc. v. Commissioner, T.C. Memo. 2019-32.


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